India Inc steps up defences as sophisticated corporate frauds surge

Mint

15-07-2025

A surge in white-collar crimes over the past two years is prompting Indian companies to tighten internal controls and seek legal counsel to protect against potential liabilities, experts told Mint.
Firms in high-risk sectors like financial services, including Mahindra Finance, are proactively working with law firms to strengthen compliance and flag anomalies early, as tech-enabled fraud and remote work increase vulnerabilities.
'There has been a 50-70% rise in white-collar crimes and corporate frauds over the last two years," said Sahil Kanuga, partner at law firm Cyril Amarchand Mangaldas, who tracks white-collar crimes.
An employee emailing an official document to himself, sanctioning funds approved by the chief executive officer over email, or a spurt in transactions at odd hours could trigger scrutiny for white-collar crimes.
Companies are increasingly disclosing potential internal lapses to their legal counsel, relying on the confidentiality of the client-lawyer relationship.
Law firms say clients trust them to not just assess potential legal exposure but also to deploy in-house forensic teams to investigate any breach, identify gaps in controls, and proactively weave in safeguards such as tighter employment clauses or vendor contracts.
India Inc on alert
Consulting and audit firm PwC found that 59% of the Indian companies it had surveyed for a study, published in December, had encountered financial or economic fraud in the past 24 months, surpassing the global average of 41%.
Grant Thornton attributed the rise in fraud cases in recent years to the impact of Covid-19. In its 'Financial and Cyber Fraud Report 2024', the business advisory noted a significant increase in fraud incidents post-pandemic driven by factors such as the shift from on-site to remote work, insufficient internal controls to keep pace with organisational changes, and various technology-related challenges.
Last year, Mahindra Finance uncovered a ₹150 crore fraud involving forged customer verification, or know-your-customer (KYC), documents in retail vehicle loans. Since then, it has introduced stricter controls, including surprise 5-day mandatory leaves for executives in sensitive roles like treasury, underwriting, and branch operations.
'During this period, the executive will not have access to their official e-mail/approval authority… and all sanctions will be given by the next in command," Manish Sinha, chief human resources officer at Mahindra Finance, said in an email reply to Mint.
The firm also rotates key staff every 4-5 years to curb risks tied to long stints in the same role or location.
In another case, according to Cyril's Kanuga, the India finance head of a global pharma firm wired lakhs of rupees within hours of what seemed like an urgent payment request from the parent company's CEO, only to realise it was fake. Since then, the firm has mandated multi-factor authentication, requiring a second approval or a one-time password sent to an authorised device to prevent solo approvals.
'The detection of such financial fraud can damage a company's reputation. For publicly traded companies, fraud discoveries almost invariably lead to sharp declines in stock price," said Avik Biswas, partner at law firm Khaitan and Co.
Indian companies are also ramping up employee awareness, bringing in lawyers to highlight how seemingly harmless actions can raise red flags.
Apeksha Mattoo, partner at Trilegal, warned employees against emailing official documents to personal accounts, noting that during white-collar crime audits every email is scrutinised.
'We have seen employees in large ad agencies and insurance firms email things like Form 16 to themselves, which can trigger suspicion, even though it's publicly available," she said.
In one case, a CEO who had emailed his son's school fee details to his office email faced corruption allegations during his exit checks when he was leaving the company, according to Mattoo.
Mohammad Kamran, leader, international disputes and investigations, at Nishith Desai Associates, cited another recent instance of fraud.
'In this case, instead of email, it was the parties' Whatsapp/Telegram group that was compromised. A group was created between the buyer and seller. A hacker created a similar group with similar names and display pictures, and added the parties to the fake group where the parties shared crucial information, leading to financial losses," said Kamran.
AI in fraud detection
Biswas of Khaitan and Co. warned that for startups or early-stage firms, a single fraud incident can threaten survival by eroding investor confidence overnight.
To avoid such fallout, companies like Peak XV-backed lending fintech CASHe are strengthening their internal controls and response systems with artificial intelligence, apart from aligning with the Reserve Bank of India's baseline governance frameworks.
'We're also piloting AI-based fraud detection tools, including behavioural biometrics, to further reinforce our risk framework," said CASHe CEO Yashoraj Tyagi.
Apart from using artificial intelligence and data analytics for real-time alerts and anomaly detection systems, companies are also using AI and machine learning tools to see if sensitive files are being accessed at odd hours or in unfamiliar locations.
Major fraud detection tools and platforms including IBM Safer Payments, FICO Falcon, DataVisor, Sift Science, and Palantir Foundry use AI, machine learning, and advanced analytics to detect anomalies, prevent transaction fraud, verify identities, and analyse large data sets across sectors such as banking, insurance, and e-commerce.
Indian regulators, too, are turning to AI. The RBI Innovation Hub's MuleHunter.AI uses AI and machine learning to analyse transactions and identify mule accounts faster and more accurately than traditional methods, with pilots at two major public sector banks showing promising results.